Google Risk Map

Above is a risk map based on the risks that Google faces. All information about Google's risks was obtained from Google's Form 10-K at this site http://www.sec.gov/Archives/edgar/data/1288776/000119312507044494/d10k.htm#toc70021_4 . A risk map is a scatter plot with "Frequency" on the x-axis and "Severity" on the y-axis. Risks can be loosely classified into four main categories: High Severity/High Frequency, High Severity/Low Frequency, Low Severity/High Frequency, and Low Severity/Low Frequency. Risks that fall into the High Severity/High Frequency are the events where risk management is necessary to maximize the value of the firm. For Google, these risks are the acquisition of competitors, revenue growth rate decline, and index spammers (manipulation of web search results).

Risks that are in the High Severity/Low Frequency category are the reduction of advertising revenue, international operations/competitors, the interruption of information technology, and new technologies that block ads. A significant amount of Google's revenue comes from advertising and although these events are not that frequent, they still require attention because of their high severity.

In the Low Severity/High Frequency quadrant, we have the risks of losing Google members, intellectual property rights claims, and the violation of US or foreign laws. These events do occur relatively frequently but since their severity is generally low, any risk management would more than likely be wasteful. All other risks on the map are in the Low Severity/Low Frequency category and shouldn't require a lot of attention unless either the severity or the frequency increases.